If you have been reading previous articles, you may have read about tax breaks that are in the pipeline for Italian residents.
They have been proposed by Matteo Salvini and his party La Lega. The proposals that are the most interesting from my point of view are the following:
FLAT TAX OF 7% FOR RETIREES MOVING TO ITALY
This was introduced into the ‘Legge di Bilancio 2019’. In short, anyone who moves to Italy and is in receipt of a pension income from abroad, can benefit from a flat tax of 7% on their income for a period of 5 years after becoming resident, based on the criteria that:
a) you must establish residency in one of the following regions, Sicilia, Calabria, Sardegna, Campania, Basilicata, Abruzzo, Molise e Puglia.
b) the town/village must have less than 20,000 registered inhabitants.
c) you must NOT have been resident in Italy in the last 5 full tax years prior to taking the offer.
d) you can opt out of the regime if you feel it does not fit your circumstances.
The idea is to re-populate the southern regions of Italy which have been decimated over the last 20 years due to lack of employment opportunities and mass migration to the large Italian cities and Northern Europe. The aim is to try and draw in foreign money and also Italians abroad who may wish to move to Italy in retirement.
CHANGES TO THE INCOME TAX BANDS
From calendar year 2020 there are proposals afoot to reduce and simplify the current income tax bands. Currently there are 5 tax bands in Italy:
|On the first $15000||23%|
|€15001 – €28000||27%|
|€50,000 – €75,000||41%|
The initial proposal was to reduce the rate of taxation to 15% on the first €65000 of income and then 20% above. Whilst that has been introduced in 2019 for self employed people on a partitia IVA, the proposal on personal income has been scaled back somewhat since the initial proposals, mainly due to concerns over balancing the books. The latest proposal doing the rounds is to reduce the number of income tax bands, but the rates do not move much:
|On the first €28,000||23%|
|€28,000 – €75,000||33%|
An income of €28000 per annum gross would amount to an annual saving of €520pa.
An income of €50000 per annum gross would amount to €1620pa
These are not figures that are going to change many people’s lives in a big way, but something is better than nothing. However, all this is hypothetical at the moment as we wait to see the final proposals and implementation of the law. It is unlikely that we will know more at this point since Salvini is quite likely to force another general election this year in lieu of his gaining popularity and the demise of M5S. Since the flat tax was his proposal, if he becomes PM, then further changes could be in the pipeline. Watch this space!
So, all in all I don’t see any great game changers for you or me, but who knows. At least we have the sun, sea, mountains, food and ‘la dolce vita’.
The above article was kindly provided by Gareth Horsfall from The Spectrum IFA Group and originally posted at: https://www.spectrum-ifa.com/new-tax-laws-in-italy/www.spectrum-ifa.com/ethical-investing-what-exactly-does-it-mean/